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Private equity: new cash for expanding businesses
August 3, 2012 | 0 Comments

Funds target capital-hungry companies in Africa

By Bill Hinchberger*

Train station in Mombasa, Kenya: In 2011, an Egyptian company invested in the company operating the railway from Mombasa to Uganda in the largest private equity deal in East Africa that year.  Photograph: Alamy / Tina Manley

Train station in Mombasa, Kenya: In 2011, an Egyptian company invested in the company operating the railway from Mombasa to Uganda in the largest private equity deal in East Africa that year. Photograph: Alamy / Tina Manley

Africa is growing, and African companies need cash to expand. Investors want in on the action, especially given low returns in many other parts of the world these days. But with few stocks and bonds, and scant liquidity for those out there, how do investors get a foothold? And how do African firms access much-needed cash?

Enter private equity — the purchase by a private investor of a share of a company that is not listed on a stock market. The company can take the money from the sale and use it for expansion or other investments. In exchange, the owner gives up some control, as the new partner gets a seat on the board or, in smaller companies, plays an advisory role. Eventually investors make money by selling their shares or receiving dividends.

Opportunities galore

In Africa, private equity is all the rage. “If you look at all the opportunities,” says David Jeromin, managing partner of the US-based Golden Mean Capital, it is like the “nightmare” of someone with attention deficit disorder. “There is just so much stuff.”

Announcements of new African private equity funds come regularly. In February the African Development Bank (AfDB) announced that it would chip in US$50 million towards a fund of the US-based Carlyle Group, which plans to invest at least $500 million in sub-Saharan Africa. In May, the Brazilian investment bank BTG Pactual launched a $1 billion Africa-focused private equity fund. In the 15 months from January 2011 to March 2012, eight new funds focusing on East and Southern Africa were launched.

East Africa alone has 16 dedicated funds, out of 53 active in that region. Officials of nearly three dozen funds responded to a survey, released in March by Deloitte, a global consultancy, and Africa Assets, a private research and consulting firm, showing that nearly four-fifths planned to increase outlays in the next year.

The overall numbers are impressive, although a bit volatile. Private equity investment in sub-Saharan Africa jumped from $741 million in 2003 to $1.3 billion last year, with ups and downs in between, according to the Emerging Markets Private Equity Association.

All sizes

Private equity placements come in all sizes. The biggest in East Africa last year was a $287 million deal by Egypt’s Citadel Capital to invest in Rift Valley Railways, which operates the railroad from Kenya’s Mombasa seaport to Uganda. The AfDB, whose private equity portfolio stands at $1.1 billion, regularly invests in independent funds that make equity placements in Africa. These funds have invested in 294 companies, of which 54 topped $15 million and 163 were under $1 million.

Infrastructure, banking, mining, oil and gas, and other commodities generally attract the heavy hitters. At the other end of the spectrum, venture capital focuses on less mature companies, which are generally small and often headed by a charismatic entrepreneur.

One such company is Cheetah Palm Oil, a start-up in Ghana founded by the well-known economist George Ayittey. Cheetah has backing from Golden Mean Capital. Instead of buying land and growing crops, it will work with a producers’ cooperative to help market products internationally and to ensure that farmers get fair prices, microcredit and agricultural extension services. The project has the potential to encompass 50,000 small growers with farms covering 75,000 hectares of land.

This is not your genteel, Silicon Valley–style venture capital. “You have to rally resources around the entrepreneur and build infrastructure,” says Mr. Jeromin, whose firm is solidly in the venture capital realm. “It takes a heck of a lot of time.”

Venture capital remains a small subset of all private equity operations in Africa, partly because it is so labour-intensive. “There are a lot of people who do not want to get their hands dirty,” Mr. Jeromin complains.

A rutted road

Even for larger investors, the path to profitability can seem more like a rutted dirt road than like a freshly paved expressway. “Private equity is not challenging in terms of finding investment opportunities,” says Larry Seruma, chief investment officer and managing principal of Nile Capital Management, based in the US state of New Jersey. “It is like fishing in a barrel. The problem is with managing the business. Often there is not enough talent to take it to the next level. If you are a minority shareholder, you might not find the right people to represent you on the board, for example.”

On the talent front, Seruma, himself a native of Uganda, finds hope in the return of people who were once counted as drops in the brain drain. “The African diaspora is huge,” he says. “Well educated people are going back. Employment in the developed markets is not that good anymore, and Africa is growing. Local talent is moving back.”

Investors are also worried about their “exit strategies,” a euphemism for how they expect to realize returns on their investments. After all, these are profit-seeking capitalists, not philanthropists.

Venture capitalists like Mr. Jeromin sometimes look to larger private equity firms to buy their stakes as their protégés grow. Another option is known as a “trade sale,” selling all or part of a firm to a muscular multinational company looking to expand. Potential buyers could include major players in neighbouring countries seeking cross-border expansion to take advantage of the liberalized flow of goods and services within regional trade blocs.

Recently the Aureos Southern Africa Fund sold its 49 per cent stake in Zambia’s foremost producer of table eggs, Golden Lay, to the African Agriculture Fund, a private fund managed by Phatisa, which invests in sustainable food businesses across Africa. “This marks a very successful investment and exit for Aureos,” says Ron den Besten, its managing partner. “Golden Lay has made great strides in the last five years. Production capacity has more than doubled as a result of our strategy of investment in new state-of-the-art laying houses, providing the impetus for exponential financial growth during our investment period.”

Few IPOs

One popular exit strategy elsewhere, especially in the US, is the initial public offering (IPO), in which an investor sells at least part of its stake when the company puts its shares up for sale on a stock market. But African stock markets tend to be thin and illiquid (see Harnessing African stock exchanges to promote growth), and so IPOs have been relatively rare, although not unheard-of.

Mr. Jeromin reaches back into US history for another strategy. “If you go back to the 1800s, before there were liquid markets, investors got their money through dividends. You can set up a preferred-share structure,” in which certain shareholders receive privileged pay-outs.

Private equity is not without its drawbacks. Company owners and entrepreneurs will not always be pleased by pressure they might get from their new partners. And investors may lose interest if their exit strategies prove elusive.

But private equity seems to be starting to fill a void that cannot be handled by banks alone. “For most companies in Africa, raising money means going to the bank,” says David Levin, senior managing partner of Nova Capital Global Markets in New York. “We bring in a different level of financing.”

*Source Africa Renewal Online

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Five investment trends in Africa
August 1, 2012 | 0 Comments

By Kate Douglas*

It is an increasingly popular belief that now is the time to invest in Africa. In a recent KPMG panel conversation focused on transacting in Africa, six experts on the subject discussed a number of investment trends that are currently being seen in the continent. How we made it in Africa’s Kate Douglas circled out five note-worthy trends from the discussion that all investors should be aware of.

1) Investing in regions, not just countries

“We’ve got to acknowledge that Africa is a huge continent with many, many different countries,” said Alan Field, KPMG South Africa’s head of tax and legal.

Africa is the second largest continent in the world with diverse cultures and distinct regulatory environments. For this reason, investors should not view Africa as a single entity to invest in. However, investors are increasingly able to look at a larger reach than just a single country. Regional economic blocs provide investors with access to larger markets.

Carel Smit, KPMG’s Africa head of energy and natural resources, added that attractive investment destinations are not only defined by geography, but also by language (such as the Portuguese, French and English speaking countries).

“The East African Community is actually leading the way in terms of zero tariffs, which is ultimately what it is all about, and the free movement of people. What we see with many of our clients, especially South African companies that are looking to access the opportunities on the rest of the continent, they will broadly think the Southern African opportunity can perhaps be accessed from South Africa … then they will look at East Africa much more as a bloc, given the amount of integration that there is,” commented Heloise Smith, executive vice president of business development at Standard Bank.

According to Smith, West Africa is a different conversation with Nigeria dominating the region due to its sheer size. Ghana may be viewed as a better entry point into West Africa for some companies, but Smith added that Nigeria is ultimately where investors want to be.

2) Big or small, space for all

There have been entries of both large international companies and smaller businesses into Africa. “We’ve seen absolutely both of those happening, so it’s a combination. Certainly we see the big multinationals are now no longer ignoring Africa,” stressed John Geel, KPMG South Africa’s head of transactions and restructuring. “Historically people were saying there was a risk with investing in Africa and I think people are now seeing it as: if you don’t invest in Africa, there is a risk.”

CEO of the Kenyan Bankers Association, Habil Olaka said banks in Kenya are trying to bring in SMEs into their financial agenda to grow the market. “Economic growth in this part of the region is mainly being pushed forward by the SMEs, and SMEs are some of the entities that are – so to speak – financially excluded.”

3) Private equity gaining momentum

“I think private equity on the African continent is still relatively new,” said Smith. “But what is happening at the moment is it is starting to gain momentum. There are funds who are really excited about the opportunities in Africa.”

Private equity firms that have increased their investments in Africa include Actis and Helios.

“We have seen quite a number of private equity fund players coming into the market,” added Olaka. “A number of them have raised funds and they are trying to penetrate the market. A number have actually been set up, not just in Nairobi but within the East Africa region. But most of them somehow are based in Nairobi.”

4) Chinese investment in infrastructure

In the past 10 years, African markets have seen a huge interest from Chinese investors who, in order to fuel their own growing economy and population, require access to Africa’s vast reserves of minerals and other resources.

“We certainly see the Chinese investing not only in resources but also in infrastructure,” said Standard Bank’s Heloise Smith. “They are building roads, they are building hospitals, they are building all over the continent.”

Smith believes that there is a much more positive view of the Chinese in Africa because everyone is benefiting. “I think even businesses and other companies active on the continent are starting to see the Chinese as partners, and investing in the infrastructure that is so critical to do along the whole resource boom, but also to enable … the growth which is everywhere forecasted for the continent.”

5) Growing African middle class boosting demand for consumer goods

According to Smith, the growing African population – that is increasingly affluent – is driving some of the trends seen in Africa, including investment in the fast-moving consumer goods (FMCG) sector.

“There is a lot of debate as to how you define the African middle class and you can debate about what the definition is, but the fact is its growing and it is increasingly urbanising which makes it possible for the FMCG [companies] and other service providers to get economies of scale because you are increasingly going to have cities in excess of 10 million people on this continent over the next few decades,” said Smith.



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How Divine Ndhlukula became one of Africa’s top women in business
August 1, 2012 | 0 Comments

By Kate Douglas*

Divine Ndhlukula started SECURICO, one of Zimbabwe’s largest security service providers, with only four employees in 1995. Now the firm has over 3,500 employees, including 900 women. Ndhlukula is a women entrepreneur in a typically male domain and is an outspoken women empowerment activist in Africa. How we made it in Africa asks Ndhlukula about what it is like to break down stereotypes and be a successful woman entrepreneur in Africa.

What inspired you to start a security service company?

Firstly, I needed to create a decent livelihood for my family and I always knew that I wanted to go into business from a very tender age and would tell my friends in high school that the business I was going to start was going to be significant in size.

Secondly, I identified glaring gaps in the quality of service and professionalism in the private security sector and this inspired me to start a security company and make a difference.

Thirdly, I wanted to make a difference to disadvantaged women who could not get opportunities to get formal employment and I knew the security industry was a mass employer. I became an activist for the empowerment of women when I was very young, at school. When I started working I joined women empowerment groups and I got to meet various role models who inspired me to seek personal self-actualisation. That inspiration assisted me in my professional career and I was able to climb the corporate ladder. By the time that I saw the business opportunity in the security sector I was ready – both emotionally and experience wise.

What major challenges have you faced since starting SECURICO?

The first major challenge was that the industry was heavily male dominated and there was a general perception that security was not a job for women. The challenge was to convince the market that I could do the job despite the fact that I was a woman.

Clients even refused to be guarded by women and it took a lot of persuasion to convince them that their security would in fact improve if they accepted women to guard them. Changing that negative perception about women was not easy but my team and I persisted and with time women were widely accepted in the industry.

The other challenge was that I was coming from a totally different industry and had no knowledge about how security organisations operate. I therefore had to learn the job from scratch. My aim was to learn the job, innovate and improve and perform better than the competition and that worked quite well.

Another challenge was that the industry was dominated by big players who had been in the business for a long time. They had the brand and financial muscle but I was certain that I could beat them on service quality. I also struggled to get funding for the new business. At that time the economic challenges that faced Zimbabwe for the next decade were just starting and the financial sector was very jittery so they mostly refused to provide funding.

I was also unlucky in that I was a woman venturing into a business where there was a general belief that women would not succeed and this contributed to the failure to secure funding. In the end I decided to make do with the little that I had and eventually I grew the business by ploughing back all the profits.

Where would you like to see your company in 10 years time?

In ten years time SECURICO shall be the biggest name in the private security services sector in the Southern African Development Community (SADC) region.

How did your business manage to survive during the Zimbabwean economic crisis?

The period of the economic crisis was the most difficult for SECURICO but ironically the company actually grew and gained a lot of the market by taking advantage of the hardships that competitors were facing. When the crisis started to bite I assembled a taskforce comprising of identified individuals at various levels. We tasked this team to brainstorm and come up with ideas on whom to tackle the various challenges that we were facing.

The situation called for people to think outside of the box and it is quite amazing how we got excellent innovations that we implemented to our advantage. We managed to keep ahead of the situation because we kept changing our strategy to suit the current situation. Things were changing very fast during those days and something that worked for you at the beginning of the week would be useless by the end of that same week. This called for versatility, constant adaptation and use of creative business methods.

In the end we used a raft of strategies such as providing temporary accommodation to employees, negotiating to be paid in kind for services, paying employees using basic commodities instead of cash, providing transport to employees, deferring payments for service for strategic clients, rewarding employees for going the extra mile, going to the rural areas to recruit staff and a lot more other strategies. We also introduced our Excel Guards – highly trained operatives who were paid twice the normal salary. We sold this new service offering to targeted clients who had the funds to pay a premium price for high quality services.

Looking at that time in retrospect I attribute our survival and growth to the decision to involve everyone in tackling the challenges that the company was facing.

What is the biggest mistake an entrepreneur can make when starting a business?

There are three big mistakes in my opinion. One is failing to learn the job adequately. Second one is not having a strategic vision and thirdly, lacking financial discipline to distinguish personal funds from business funds thus stifling the business from growing.

What does the Zimbabwean economic climate look like today? Is it a good time to start a business in Zimbabwe?

There are a lot of opportunities in Zimbabwe. In fact there are more opportunities now than ten years ago. During the last ten years the economy shrank considerably and there is a sort of a vacuum now. There are very few formal jobs so a big chunk of the population is making a living through various enterprises.

It’s like everyone is an entrepreneur now because all the workers who were laid off are using their skills to start small businesses that sustain their families. Most of the money in Zimbabwe now is in this informal sector were things like furniture, basic foodstuffs, clothes and other services are found on the streets and home industries.

The way I see it people are starting small now in various ventures but in a few years a new breed of entrepreneurs will emerge. It certainly is a good time to start a business in Zimbabwe. In fact we have seen a lot of people coming to start businesses in Zimbabwe especially by people from the Asian countries.

Why do you think there are so few woman entrepreneurs in Africa? Do you think this is changing?

The African economy is actually driven by women at the micro level. Most of the African population lives in the rural areas and women are more active in economic activities there than men mainly for family survival.

However we have very few women entrepreneurs who break into big business, mostly due to cultural reasons. When growing up women are never primed to become leaders. Rather the stereotypical role is that a woman should become a good wife and mother therefore many women simply strive to fulfill this role. Even at school, boys are expected to perform better than girls and in the professional world women simply drift into certain professions that are regarded suitable for women.

So at the end of the day it’s our society that mostly militates against the development of women entrepreneurs. Motherhood is also a big factor that acts as a drawback. Most people do not realise that raising children is a full time job and those women who manage to raise children and advance in their professions at the same time are really strong.

The good thing in Zimbabwe is that we have a very good education system so the new generations of parents are more enlightened about issues affecting the girl child and are raising them differently. This will afford space for women in the future.

Any advice to budding women entrepreneurs?

Women entrepreneurs have to work twice as hard to succeed. They should expect certain difficulties to crop up merely due to the fact that they are women. In such situations the best thing to do is to remain resolute, focused, ethical and preserve your integrity.

It is also very important to network and get to know people – the right people with the potential to help your business either as customers, suppliers or associates.

Keep a sober head and remain focused. Do not rush to conclude that you have made it. Always expand your dreams and reinvest your money into the business. Avoid the trap of leading a luxurious life at the expense of the business.



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Lagos to host NUSACC International Trade & Investment Summit
July 31, 2012 | 1 Comments

By Ajong Mbapndah L

The Nigeria-USA Chamber of Commerce-NUSACC is scheduled to host the 3rd International Trade & Investment Summit in Lagos, Nigeria. Taking place on August 10th, the

Lee Kareem

Lee Kareem

Summit in Lagos will primarily be a business matchmaking initiative to introduce American Businesses to Nigerian Businesses .In attendance will be former President Olusegun Obasanjo as guest of honor, to the federal minister of Trade & Investment as the key note speaker .Other guests would include the federal minister of power, Lagos and Kogi State Governors. In an interview with PAV, Kareem Lee the Chambers CEO says  NUSACC will be leading more than 23 business men and women from the United States to interact with about 200 business men and women in Nigeria at the  Summit. Businesses expected to participate at the Summit  will include Construction, Healthcare, Logistics, Oil, Information Technology, Semiconducting and Real
Estate Development Industries. With almost 170 million English speaking consumers, and vast natural resources, the business climate in Nigeria today is very promising says Mr Kareem Lee. Interviewed by Ajong Mbapndah L, Kareem Lee introduces NUSACC, the upcoming Investment Summit and more on Nigeria.

PAV: Could you start by introducing the Nigeria-USA Chamber of Commerce to us, when it was created, its membership and what it does?

Kareem Lee: The Nigeria USA Chamber of Commerce (NUSACC) was incorporated as a nonprofit organization in the State of Ohio in August of 2010 and it began operations in March  of 2011.   It is certified as a Tax Exempt Organization under the US IRS Code  Section 501 (C ) 6.

NUSACC was established as an international business and legislative advocacy organization with a primary focus on Nigeria and the US. It’s membership is rapidly growing  with  individual and corporate members in  the States of Ohio, Florida, Georgia, Texas, New York and in Nigeria.

PAV: May we know some of the significant achievements of the Chamber since its creation?

Kareem Lee: NUSACC’s first two Trade & Investment Summits  in Cleveland, Ohio  drew  representatives from 150 organizations; NUSACC has established affiliation with the following organizations: The National Black Chamber of  Commerce, Cleveland Council on World Affairs, Overseas Private Investment Corporation, The US Department of Commerce, The US Small Business Administration. NUSACC has a close working relationship with the Embassy of the Federal Republic of Nigeria in Washington, DC. NUSACC also has an indirect affiliate relationship with the US Export Import Bank and it is represented at the Construction Committee of the National Black Chamber of  Commerce.

NUSACC has successfully assisted American Businesses in obtaining Visas to visit  Nigeria,   setting up Bank Accounts in Nigeria, finding distributors for their products, distributing samples of their products to getting their products registered and/or certified for distribution in Nigeria. Conversely, NUSACC has assisted Nigerian businesses with due diligence on American Businesses, product and service procurement sourcing.

NUSACCC has offices and Representatives in  Abuja, Port Harcourt and Lagos and it is currently establishing relationships with  the Abuja Chamber of Commerce, Lagos Chamber of Commerce & Industry, Nigerian National Chamber of Commerce and Ogun State Chamber of Commerce.

PAV: We understand that the Chamber will be organizing an International the International Business Summit in Lagos , could you tell us more about the Summit and some of its highlights?

Kareem Lee: The 3rd International Trade  & Investment Summit in Lagos will primarily be a business matchmaking  initiative to introduce American Businesses to  Nigerian Businesses. Business and Political leaders have been lined up  to address the  Summit, from Nigeria’s former President Olusegun Obasanjo as the Guest of Honor, to the federal minister of Trade & Investment as the key note speaker; other guests would include  the  federal minister of power, Lagos and Kogi State Governors, delegates from States and Business leaders. NUSACC will be leading more than 23 business men and women from the United States to interact with about 200 business men and women in Nigeria at the  Summit. NUSACC believes that the highlights of the Summit would be during the Break out Sessions where  each Business representative from the US would  have the opportunity to network and perhaps consummate business deals with  their Nigerian counterparts.

PAV: So what will it take to be part of the Summit and what should those attending expect to achieve?

Kareem Lee: For non-NUSACC members, registration fee to attend the Summit  is $350. Those who attend the Summit would have the opportunity  to interact with individuals representing 200 businesses in Nigeria, including opportunity  to hear first hand the  Nigerian Government’s Trade & Investment policy as well as views of leading American and Nigerian Business men and women with respect to current business environment in Nigeria.

PAV: Any idea about some of the partners and companies expected at the Summit so as to convince a few more last minute participants?

Kareem Lee: Some of the American businesses that would be represented at the Summit are drawn from Construction, Healthcare, Logistics, Oil, Information Technology, Semiconducting and Real
Estate Development Industries.

PAV: How will you describe the business climate in Nigeria today?

Kareem Lee: With almost 170 million English speaking consumers, and vast natural resources, the business climate in Nigeria today is very promising, considering that its economy grew at the rate of 8% and 7.5% in 2010 and 2011 respectively, compared to  2% growth rate for the US economy in 2010. It is the fastest growing economy in Africa. According to the IMF, Nigeria became the World’s 30th largest economy in 2011, and it is on the trajectory to surpass South Africa as Africa’s largest economy in 2014.

PAV: The question is asked because the news on Nigeria is dominated by attacks from the Boko Haram, tales of corruption etc, the country no doubt has potential, but is the climate such that it could embrace sustainable investment?

Kareem Lee: It is not NUSACC’s role to defend Boko Haram’s attacks on Nigeria anymore than it is the US Chamber of Commerce’s role to defend Al Qaida’s attack on the US’ World Trade Center killing more than 3,000 innocent people. And corruption is just as much a plague in Nigeria as it is right here in the United States, only Nigeria gets more publicity for it. Be that as it may, Nigeria is still a relatively young democratic society that is working hard to address the chronic problem of corruption and other impediments to its economic development. The brisk investment activity going on in Nigeria where the Chinese are at the forefront is a testament to sustainable investment and this is where NUSACC sees an opportunity to shorten the gap between the Chinese and American investors in Nigeria.

PAV: We do not know the kind of ties the Chamber has with the Nigerian Government but if there were recommendations you had for them on how to ease the socio economic and even political climate in the country what will there be?

Kareem Lee: NUSACC’s relationship with the Nigerian Government is that of a business advocate. As the organization grows, it will embrace and develop its  other mission, which is that of a legislative advocate during which time it will be in a position to make legislative recommendations to the government.

At this time, NUSACC’s focus is to concentrate on its business advocacy role and channel its business-specific recommendations through the proper channels to the government when necessary

PAV: Besides the Summit are there any other activities that the Chamber is working on for the rest of the year?

Kareem Lee:NUSACC will soon launch a periodic News letter to keep its membership informed of current and emerging business opportunities in the US and Nigeria.  A monthly business mixer is being planned to be launched before the end of the year.

PAV: Thanks for introducing the Chambers to PAV

Kareem Lee: Thank you too

*More on the Chamber can be viewed at


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Africa Property Investment Summit 2012
July 28, 2012 | 0 Comments

By Kate Douglas *

The Africa Property Investment Summit, the biggest event on the African real estate calendar, is fast approaching with limited bookings available. The two-day event, taking place in Johannesburg from 4-5 September, will be held at the beautiful Sandton Sun Hotel.

This summit presents a professional platform for learning about African real estate investment and development. Following its success in 2011, the Summit returns with the support of more industry heavyweights and an agenda designed to draw the leading minds in the property arena.

This is a unique opportunity to discuss current trends, share industry experiences and enjoy insightful debate. If you are committed to an African growth strategy, this is a property event you cannot afford to miss.

  • Get first hand perspectives of real estate investment, development and management in Africa.
  • Be inspired by special guest speaker Sibusiso Vilane, extreme African adventurer who has climbed Everest and completed the Three Poles Challenge.
  • Network with industry players from all regions of the continent.

This year’s event features an exciting line up of speakers and panel discussion participants actively doing deals across the continent. These are just a few of the experts:

  • Vincent Lottefier: CEO Corporate Solutions EMEA (Europe, Middle East & Africa) Bringing an international corporate perspective to the opportunities identified in Africa.
  • Kevin Teeroovengadum: Director, Actis Real Estate Sharing recent views on new sources of funding, market liquidity and exit strategies for physical real estate.
  • Kuro Chihota: CEO, Ascendant Property Fund, Zimbabwe Lending insight into new fund ideas and opportunities in a time of risk mitigation.
  • Thomas Reilly: Managing Director, Sanlam Properties Sharing thoughts on finding high quality yielding properties in sub-Saharan Africa.
  • David Kinyua: Director, Acorn Group Africa, Kenya Providing analysis into the changing dynamics of the East African real estate market.
  • Amelia Beattie: Chief Investment Officer, STANLIB Direct Property Investments Franchise Sharing knowledge of fund structures and new sources of capital investing in Africa.
  • Derrick Roper: CEO, Novare Equity Partners Commenting on expansion in Africa together with strong retail partners.
  • Mark McIntosh: Head of the Real Estate Practice, Webber Wentzel Streamlining real estate law with his vast knowledge and experience in township establishment, subdivisions, consolidations, mixed use schemes and all aspects of commercial property.

The two day conference package (R6,750/US$845) includes all lunches and refreshments, an invitation to the gala dinner, parking and full access to all research, presentations and documentations. For booking information and enquiries contact Marie Coetsee on or +27 11 408 5695 or visit



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Looking to invest in African retail? Three interesting countries to consider
July 28, 2012 | 0 Comments

By Kate Douglas *

Various international retailers – from supermarket giants like Wal-Mart to clothing chains such as Gap – have recently entered the African market, targeting the continent’s growing middle class. However, with 54 independent countries, deciding which markets to enter is not an easy decision. Research company Euromonitor International recently identified a number of African countries with growth potential in the retail sector. We take a closer look at three of these markets – Zambia, Rwanda and Angola.

1. Zambia

Zambia is a large country with a small population of around 14 million people. It has some of the world’s biggest reserves of copper and vast tracts of arable land.



Zambia is an ideal setting for large-scale agriculture and this has helped local agribusiness companies to become exporters of cash crops and also supply the packaged food and drinks industries. Zambeef is a US$200m business involved in the production and retailing of meat and food products, and owns 17,000ha of land. Its retail arm sells the company’s own brand and also operates South African supermarket chain Shoprite’s in-store butchers in Zambia, Ghana and Nigeria. South Africa’s Illovo Group – Africa’s largest sugar producer with a 2011 turnover of over $1bn – was also attracted to Zambia’s uncultivated land and is involved with production in the country.

The potential for retailers to be successful in Zambia is evident by the achievements of South African companies in the country (such as Shoprite, Pick n Pay, Mr Price and the Foschini Group). Shoprite, in particular, is a leader with 28 stores. Zambia’s capital Lusaka is where most businesses operate as it has a more developed infrastructure and almost two million consumers. Pick n Pay opened its first two outlets in 2010 and picked prime retail locations, such as the newly built Makeni Junction Mall and Levy Business Park in Lusaka. At the end of 2011 the company operated four stores, focusing on large out-of-town retail locations.

There are a number of retail construction sites in the works, including the plans for a new satellite town just outside of Lusaka.

However, there are risks for retailers. Zambia is landlocked and relies on its neighbouring countries’ cooperation in exporting and importing. Furthermore, copper makes up 70% of Zambia’s exports and a turn in global commodity prices could have a nasty impact on the country’s economy.

2. Rwanda

One of the top performers in the World Bank’s ease of doing business ranking is Rwanda, moving up from 150th position to 50th between 2005 and 2011.

Though Rwanda has seen sustained economic growth since 2000, its history of violence and political instability has meant that it is still underdeveloped, especially in the retail industry. According to Euromonitor, “retail spend per capita in 2011 was only $35 compared to $108 in Kenya and over $1,300 in South Africa.”

There have been a number of infrastructure developments and plans in recent years, including the development of residential areas, roads, hotels, offices and retail spaces.



The Union Trade Centre, in the capital Kigali, is Rwanda’s first modern shopping mall, and has a 24-hour Nakumatt. In 2011 a second shopping centre, Kigali City Tower, was built in the same area, also anchored by Nakumatt. A new airport at Bugesera, 40km from Kigali, should be finished by 2016.

Rwanda has a small population of 11 million people, but a high population density (444 people per km2 compared to an average of 40 per km2 in sub-Saharan Africa). The population of Kigali is expected to double from one million to two million by 2020, creating opportunities for retail in the city. Urbanisation is one of Rwanda’s main development goals. The country needs urbanisation in order to free up land for modern agriculture. “This will lead to an increase in the urban population and fuel demand for retail goods as communities progressively switch from self-sufficiency to buying from formal stores,” notes Euromonitor.

Rwanda’s geographical position makes it an interesting access point to Central African consumers in a range of markets, such as Burundi, the DRC and Uganda.

The country is showing signs of a developing retail sector, and with not much competition, current players and new entrants have the opportunity to gain a strong foothold.

3. Angola

After decades of civil war that destroyed infrastructure and ruined the economy, Angola had nowhere to go but up. The return of peace in 2002 led to significant economic growth, albeit from a very low base. According to The Economist, Angola experienced an average annual GDP growth of 11.1% between 2001 and 2010, largely sustained by the oil industry.

“In 2011, it was the second largest African oil producer, with China its main client,” says Euromonitor. “Rising oil prices over the past five years have translated into nearly 55% GDP growth, enabling Angola to climb from being a low to a middle-income country.”



Angola’s retail sector has seen the entry of a number of foreign companies – most notably from South Africa, Portugal and Brazil. Nosso Super is a state-owned chain of 30 stores, launched in 2007. However, mismanagement and an inefficient supply chain led the government to look for a private investor to operate the stores on its behalf. Brazil’s Odebrecht, a major player in oil and construction in Angola, was chosen to manage the business at the end of 2011. This was felt to be a logical move as Odebrecht was also the contractor which built the stores.

Teixeira Duarte Group, the Portuguese-based construction firm, has an Angolan subsidiary which operates several Supermercado Maxi outlets and introduced two new store concepts in 2010 – home and garden retailer Casa de Coração and electronics and appliance retailer Maxilectro.

South Africa’s Shoprite Holdings started business in Angola in 2003 and has a network of four Shoprite supermarkets, seven U-Save discount stores, one OK Furniture and two Hungry Lion fast food restaurants, according to Euromonitor’s research.

In 2007 the Belas Shopping Mall was opened in the capital Luanda. The mall is anchored by a Shoprite and contains 100 other shops. The Ginga Shopping Mall, launched in 2011, is located in the industrial zone of Viana on the outskirts of Luanda, and is anchored by Teixeira Duarte Distribution’s Supermercado Maxi and Bompreço. The only modern shopping centre outside Luanda is the Millennium Mall in Lubango.

There are many risks to doing business in Angola, which cannot be ignored by retailers. Transport networks remain poor and energy supply is erratic. “According to the African Development Bank, only 20% of Angola’s population had access to electric power in 2011, with a lack of electricity considered the first constraint to business (68% of businesses resort to private diesel generators because of ongoing power cuts),” says Euromonitor.

Secure housing is rare and extremely expensive, making Angola the world’s most expensive city to live in for foreigners. According to Euromonitor, “a four bedroom residential house in Luanda would cost $20,000 per month, while rent for retail space in 2011 was a staggering $100 m2, compared to $45 m2 in South Africa.”

“[Angola’s] economic boom is largely dependent on the oil and gas industry, which is by essence volatile and uncertain in this part of the world … However, there is no pressing sign of a downturn in the Angolan economy as the continuing slump in developed markets will further push global investors to position themselves in high-growth emerging markets. Thanks to growing trade ties with BRIC markets such as Brazil and China and an expanding oil and mining industry, the financial risks are largely offset by the high return on investment,” says Euromonitor.


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Private equity firm sees potential in French-speaking West Africa
July 28, 2012 | 0 Comments

By Dinfin Mulupi *

East Africa is arguably the continent’s most attractive region for investment, while West Africa is more fragmented with a relatively complicated business environment.

So says Stephen Dawson, chairman of UK-based pan-African private equity firm Jacana.



“[East Africa] has a 120 million population and the countries have similar legal and banking systems. There are however some weaknesses. Some regulations in terms of free capital flow, tax regime and bureaucracy can be inhibiting. The East African Community integration is a good initiative and should help in addressing some of these issues,” Dawson told How we made it in Africa in an interview from London.

“West Africa is a very different market. Nigeria is huge and very complex, Ghana is relatively small and then there are the francophone countries with very different financial and legal structures. It is quite a fragmented region which means additional costs of doing business. There is little private equity funding there and we would like to expand across these countries,” said Dawson.

“We want to scale our operations and expand to Ethiopia and francophone West Africa. French-speaking West Africa is our current top priority. By the end of the year we are looking to establish a new fund to invest in existing and new markets,” he added.

Founded in 2008 by a group of UK entrepreneurs, Jacana’s approach is to partner with, and develop, local private equity fund managers. The combination of Jacana’s capital and expertise enables its partners to grow their teams, build their track records and raise larger funds. Jacana has therefore partnered with Fidelity Capital Partners, a Ghana-based private equity firm with a total of US$32m under management, and InReturn Capital, based in Kenya.

Through its partners, Jacana invests in businesses that typically have 10 to 200 employees and need investments of between $1m and $5m. Its funds in Ghana and Kenya have so far invested a total of $20m in 18 companies. One of Jacana’s recent investments, through InReturn Capital, is Reltex Tarpaulins Africa, a supplier of relief materials to the humanitarian sector.

Long-term business

Although Jacana is yet to make profits, the firm is optimistic that its investments in Africa will yield good returns.

“I think it is too soon to record returns on investments. We are still in the investment stage. This is a long-term business. The progress is actually good and we expect a positive financial outcome,” said Dawson.

“Our long-term goal is to generate healthy financial returns. Equally important is developing social returns in the economies we operate in, that is: job creation, contributing to local infrastructure and developing entrepreneurship,” he noted.

Last year Fidelity Capital Partners signed a memorandum of understanding with the Ghana Stock Exchange (GSE) that involved pre-initial public offering financing and an agreement for the private equity firm to use the exchange to exit some of its investments.


“The challenges we have faced were mainly about a lack of experience among entrepreneurs. We do not have the same level of infrastructure compared to Europe. A lot of people don’t understand private equity and its benefits,” said Dawson.

He explained that an ideal ‘fundable’ business should have a strong management team of people who have experience, know their sector, their competition and market, and are committed to their company. They should also demonstrate drive and ambition. The business should have growth potential, be scalable and demonstrate ability to generate strong financial growth and job creation.

Opportunities in SME market

Although private equity in East Africa has grown in recent years, gaps in funding still exist, especially in the SME market.

“Most venture capital funds in East Africa have been making large transactions with minimum investments of $5m to $10m. The smaller the amount an entrepreneur needs, the more difficult it is for them to get funding. We plan to make somewhat large transactions, but we are committed to the SME market,” Dawson noted.

He is optimistic about Africa’s future, noting that the gradual process of democratisation in African counties is a safeguard of political stability, which coupled with promising returns on investment, should attract more international investors. The consumer market, he said, is a very important driver of growth across Africa.

His advice to foreign private equity investors eyeing Africa? “It is important to have people on the ground. You cannot make assumptions; what works in one market may not work in another.”



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South Sudan – the next frontier for mobile money in Africa
July 28, 2012 | 0 Comments

By  Imara Africa Securities team*

It seems mobile operators are keen to replicate the success of Kenya’s mobile money industry in neighbouring South Sudan.

A recent Reuters article reports that telecoms operators MTN and Zain have targeted South Sudan, the world’s youngest nation, as the next untapped market for mobile money, with both groups planning to launch services that will turn cell phones into virtual bank accounts.

For every adult in the country, which marked its first year of independence this month, there are fewer than 0.01 bank accounts, compared with 0.3 for Africa as a whole and 1.6 for western Europe. That means everything has to be paid for in cash, and in a nation the size of France, with barely 100km of paved roads, sending money can be costly and dangerous.

Zain and MTN, which compete with Vivacell, Gemtel and Sudani in South Sudan, say that mobile money will make payments easier and more transparent, provide rural communities with access to financial services and could transform the economy, as Safaricom’s M-Pesa service has in Kenya. The two companies said that they intend to take on partner banks in their ventures but did not name any possible contenders.

Only 13% of South Sudan’s 10 million people own a mobile phone, but Zain predicts that this will grow to 36% by 2016. “There’s pent-up demand for it, particularly in the NGO sector, government and business,” said Hakeem Dario N’Moi, chief executive of Zain South Sudan. “They want to be able to pay their staff and transact in a more efficient way. It would certainly bring some advantages over taking money by road.”

Both operators, which have introduced mobile money services in other African countries, say that they want to emulate the success of M-Pesa. Launched in 2007, the service now accounts for more than three quarters of all mobile money transactions in Kenya. The World Bank estimates that transactions through M-Pesa and similar services equate to 20% of Kenya’s GDP. South Sudan, however, will prove a more difficult proposition because of its small population and the near economic collapse since the shutdown of oil production after a dispute with the north over transit fees.

“The path to profitability is through volume of transactions,” mobile banking consultant Loretta Michaels said. “The smaller a country is, the harder it is for any one carrier to get the kind of volume it needs.”

South Sudan offers attractive opportunities across all sectors of its economy despite the current difficulties it is facing in its dispute with Sudan. We believe the introduction of mobile money services will help boost economic activity in the world’s newest state.

Imara is an investment banking and asset management group renowned for its knowledge of African markets.



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KFC expects more global fast-food chains to enter the Kenyan market
July 28, 2012 | 0 Comments

By Dinfin Mulupi*

Fast-food giant Kentucky Fried Chicken (KFC) last year entered the Kenyan market. Kuku Foods holds the KFC franchise in East Africa. How we made it in Africa’s Dinfin Mulupi chats with Gavin Bell, a veteran restaurateur and Kuku Foods general manager, about the market reaction to KFC and why we can expect other international fast-food brands to soon open shop in the region.

What inspired the decision to bring KFC to Kenya?

We had been looking at Kenya as a potential location for a number of global franchises and KFC seemed to be the obvious choice in terms of the provision of the quality products that it offers, predominantly from the chicken perspective, given that chicken is a popular luxury here in Kenya. We have three branches in Kenya and we are in the process of building in Tanzania and Uganda, with at least one store in both countries.

How much have you invested to bring KFC to Kenya?

It is a significant investment and it is long-term. As Kuku Foods we take a long-term approach with everything that we do. Part of our agreement with KFC is to roll out at a fairly aggressive pace in East Africa. They want to ensure that there is a growth rate that allows us to move at a significant pace. We can only achieve volumes once we start rolling out stores and this will help drive down the cost of raw materials and allow for more expansion. It is expensive to set up, especially the support infrastructure and purchasing high quality raw materials to adhere to the quality standards expected by KFC.

Describe the market’s reaction to KFC

It was very flattering and humbling to see Kenyans queuing to try our products when we first opened. Even today we still have similar volumes, although the queues have died down because the processes are much faster and efficient. We are doing around six tonnes of chicken a week, up from four tonnes when we opened last year.

What challenges have you faced in East Africa?

We have faced challenges predominantly in the supply chain, especially getting local suppliers to the level where they can pass the Yum! Brands (owner of KFC) Supplier Tracking and Recognition (STAR) audit system, which monitors suppliers for food safety and security. A lot of businesses here have various certifications, but are not at the level where they can be able to supply KFC. In instances – when we cannot find a KFC approved supplier locally – we have to purchase outside the country from a KFC approved supplier. For instance, we buy our processed, pre-blanched, blast-frozen potato chips from Egypt because it has total traceability back to source. We are working with Kenyan companies to ensure that in the future we will have local chips suppliers. It is in our interest in terms of cost, logistics and storage. It is a huge expense for us to import from Egypt.

Do you expect other global fast-food chains to enter the Kenyan market?

Kenyans are becoming a lot more globally aware, brand aware and quality conscious. It doesn’t mean that people necessarily have more money, but what people are spending their money on has shifted to leisure and social activities. This will drive the entry of more brands into the market. Once KFC enters, other global brands tend to follow. It has sent a positive message for Kenya. McDonald’s have looked at the market and the challenges for their supply chain are slightly broader because they offer more products. Their model in terms of market entry compared to KFC is very different. However, it is only a matter of time before other brands come.

Kenya is ready to take its level of professionalism in the hospitality industry to a different tier. I have no doubts that other Yum! Brands restaurants like Pizza Hut and Taco Bell will be coming to Kenya in the near future. The growth of Kenya in the next 10 to 15 years is going to be astronomical.

What are your future plans for the business?

We would like to have 30-plus outlets in East Africa within the next five years. This will depend on the cost of raw materials, especially chicken. Our growth is tantamount to the changes in the cost of chicken.

* Source


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Special offer: 10% discount to attend the Africa Property Investment Summit
July 28, 2012 | 0 Comments

How we made it in Africa readers qualify for a 10% discount to attend the Africa Property Investment Summit taking place in Johannesburg from 4-5 September 2012. This special offer is only available for the first 20 readers to register.

The Africa Property Investment Summit presents a professional platform for learning about real estate investment and development in Africa. Following the successful event in 2011, the Africa Property Investment Summit returns with the support of more industry heavyweights and an agenda designed to draw the leading minds in the property arena. This is a stand-alone opportunity to discuss current trends, share industry experiences and enjoy insightful debate.

If you are committed to an African growth strategy, it is a property event you cannot afford to miss. The Africa Property Investment Summit attracts professionals with a role to play in promoting investment and building infrastructure on the continent. Delegates from 16 countries all agreed that the 2011 summit delivered in terms of quality content, interactive presentations, shared experiences and excellent networking opportunities.

For more information about the summit and to take advantage of this special offer email Marie Coetsee at Visit the website at:

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Shell To Invest $4 Billion In Two Nigerian Oil And Gas Projects
July 27, 2012 | 0 Comments

Royal Dutch Shell Plc (RDSA), operator of Nigeria’s largest oil fields, agreed to invest about $4 billion with its partners in two oil and gas projects in the country.

The Shell Petroleum Development Co. of Nigeria, which Shell operates as a venture with Eni SpA (ENI), Total SA (FP) and the government, will develop the Forcados-Yokri project and the Southern Swamp associated gas gathering project, the company said today in a statement. The projects are expected to pump 100,000 barrels and 85,000 barrels of oil equivalent a day at peak, respectively.

Southern Swamp will “collect gas, reduce flaring, while there is associated oil production and it will produce gas for domestic use for power,” Chief Financial Officer Simon Henry told reporters today in London. Both of the projects “are very strategic” for Nigeria. The Forcados-Yokri fields are located in shallow waters in the west of the country.

Shell, based in The Hague, last month said it planned to invest about $3.5 billion in a natural-gas project in Imo state in the southeast. It is working on 17 gas projects in Nigeria, set to cost a total of $6 billion, according to the company.

Shell is still looking for buyers for its two oil and gas exploration licenses in the African nation. The company has already found investors for four permits in its effort to reduce its geographical spread across Nigeria, Henry said.

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EasyJet founder to launch low-cost airline in Africa
July 26, 2012 | 0 Comments

By Teo Kermeliotis*

London, England (CNN) — A new budget airline backed by easyJet founder Stelios Haji-Ioannou will soon take to the African skies, promising to bring low-cost flights to millions of people in the continent.



Dubbed Fastjet, the no-frills carrier is expected to launch in three to four months, aiming to cash in on Africa’s robust economic growth and a growing appetite for travel by its burgeoning middle class.

The move comes after Haji-Ioannou’s easyGroup teamed up earlier this month with pan-African conglomerate Lonrho to create the low-cost carrier. Lonhro, owner of budget airline Fly540, has agreed to sell its aviation business to investment firm Rubicon Diversified Investments, in which easyGroup will hold a 5% stake.

The new business will start operations using Lonrho existing network in Ghana, Kenya, Tanzania and Angola, before expanding to more markets in the future.

“These four countries are currently experiencing great GDP growth, along with oil and gas discoveries and developments,” says Ed Winter, chief executive of Fastjet.

“We believe that the time is absolutely right to change Fly540 into a much bigger airline based on the low-cost model which has been successful in every other part of the world,” adds Winter, who is easyJet’s former chief operating officer.

The business, which will still be majority-owned by Lonrho, has set a target of carrying around 12 million passengers per year, “which creates an airline of roughly 40 aircraft,” according to Richard Blakesley, Fastjet’s finance director.

The low-cost carrier expects to offer average fares of $70-80 before tax, which could fall to as much as $15-20 when booked early.

“That price will absolutely democratize air travel, totally changing the way people are traveling in Africa,” says Winter.

Fastjet executives say they hope to tap Africa’s rather underdeveloped aviation network, offering an affordable alternative in a transport environment largely dominated by difficult terrains, long bus journeys and poor infrastructure.

 Haji-Ioannou, who set up easyJet in the mid-1990s, has described Africa as “the aviation industry’s last frontier.”

“Past experience shows by halving fares, a successful low-cost carrier can encourage those people, who have never previously traveled by air, to fly. For Africa, with its densely populated cities separated by great distances — this means a potential new market of millions,” he said after the reverse takeover by Lonhro.

In 2011, low-cost carriers occupied 9% of the African market, suggesting that there is a large potential for further development and growth, says aviation expert Linden Birns.

He notes, however, that the big challenge for airlines is breaking into cross-border flights and launching intra-African routes.

“At the moment access to markets on a transnational basis is governed by a set of bilateral air transport agreements,” says Birns, founder of South Africa-based aviation consultancy Plane Talking.

“Under those agreements, governments stipulate who’s allowed to fly and how many flights. That really keeps a lid on things — if you can break through those barriers and introduce competition then we should see some pretty rapid growth happening in the market.”

Aircraft manufacturer Airbus has forecast Africa traffic to expand by about 6.5% per annum between 2011-2020 and by 4.9% between 2021-2030, for a 20-year growth rate of 5.7%. This compares with a 4.8% increase in demand on a worldwide basis over the next 20 years.

“It’s no secret that Africa represents a massively untapped market,” says Birns. “If we look at where growth is happening in the world, Africa is certainly up there.”

Birns says that as Africa’s cities get more populated and as demand for business is growing, the expansion of the low-cost model should revolutionize the continent’s air transport in the same way that it did in North America, Europe and now in Asia.

“More people will be able to trade, more people will be able to do their tourism and it should be a good economic driver,” he says.

Fastjet’s foray into the African market comes amid a tumultuous time for aviation industry in the continent — earlier this month, a plane crash in Lagos, Nigeria, killed all 153 people aboard.

Winter says Fastjet will raise the bar on safety and security, operating “as though it was an European airline.”

“There’s no reason why Africans shouldn’t be just as safe and secure as in an European airline and we will follow those sort of procedures,” he says. “Now, that adds a bit cost to our operation but to my mind all of those costs are actually worthwhile to provide a safe and secure airline.”

Looking ahead, Winter says the biggest challenge for Fastjet is dealing with lack of airport infrastructure, as well as high taxes imposed by governments and rocketing fuel duties.

“What we’re hoping is that governments will realize that by allowing these tax levels to come down to more normal levels, we will be able to do most markets and their total revenue will actually increase,” he says.

But despite the challenges, Winter says he is “incredibly excited” about the venture, saying that there isn’t a better time to enter the African market.

“Five years ago it just wasn’t that level of GDP growth, the spread of wealth amongst the population and the level of investment,” he says, “Whereas now I think all those factors come to play and now it’s exactly the right time to do this.”



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